• The Gaggle: Legislative session recap, May 2017

    The Gaggle: Legislative session recap, May 2017

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    The Gaggle: Teachers protesting, a budget afoot and what’s up with Stanton?

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  • The Gaggle: Teacher raises, ACA repeal and ballot initiatives

    The Gaggle: Teacher raises, ACA repeal and ballot initiatives

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    The Gaggle: Federal budget and few women in the Legislature

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    The Gaggle: Obamacare replacement, George W. in town and TANF benefits

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    The Gaggle: Tax that did not get cut, tweets from Gosar and a non-job

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    The Gaggle: Bigfooted, McCain and HB 2404

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    The Gaggle: How much debt is too much?

Gov. Doug Ducey and the Arizona Legislature ended the 2017 session congratulating themselves on their achievements and their “education budget.” 

“BIG accomplishments this session. Great work by all,” Ducey posted on Twitter Thursday.

But despite the messages of congratulations, many of the state’s most challenging issues remain unresolved. 

Lawmakers and the governor opened the state’s Empowerment Scholarship Account school-voucher system to all students, but stifled bipartisan efforts to start discussions on increasing the Proposition 301 sales tax for public education. 

They handed Arizona’s universities $1 billion in bonding capacity to repair and construct buildings, but said they would take a wait-and-see approach before addressing a lawsuit alleging they have underfunded public K-12 capital projects by $2 billion. 

They tossed residents a tax cut that will total less than $5 a year, but promised broader tax reform would come at a later time.

They decided to sweep $60 million — instead of $90 million — from a fund that pays for statewide road maintenance and construction.

They created a new program that rewards the state’s highest-performing schools, but told organizations that serve the state’s disability community to try again next year for the full amount they say they need to keep their doors open.

“We made some great strides, I think, in the budget this year,” said Rep. T.J. Shope, R-Coolidge. “Hopefully we continue to have economic growth in the state and we can have some more dollars and make some more investments in K-12 and things like that going into the following year.” 

But minority-party leaders said more could have been done this year — and should be done next year. 

“I don’t see a whole lot of good stuff that came out of this session,” said Sen. Steve Farley, D-Tucson. “It’s going to take many years to clean up the mess that we’ve created, not just this session but in the years previous. And we have not started on that hard work.”


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Education’s mixed session

Next year’s budget includes an additional $167 million for K-12 education, on top of the annual infusion for inflation and student growth. 

Of that, $34 million will go toward a 1 percent teacher raise next year; $38 million will go to the state’s highest-performing schools; $17 million will go to school repairs and $63 million will go to new-school construction. 

But the public K-12 school-funding discussion took a backseat this session to the battle over opening the state’s school Empowerment Scholarship Account voucher program to all students and boosting university funding to expand their construction bonding capacity. 

There was little public conversation about the Legislature’s overall vision for K-12 public education or how to fund it. The party line from Ducey and Republican leadership was that they did what they could with limited spare revenue. 

Any discussions about expanding that revenue — whether through raising taxes or reversing tax cuts — were put off. 

“I’m constantly hearing from people in the majority, ‘We love education, we just don’t have the money to pay for it,’ ” Farley said. “But we do have the money for it. We have $4 billion we’ve given away out of our general fund in corporate tax cuts.”

He said the state could find $2 billion by closing some of the tax-cut loopholes.

“We could lower our tax rate by a penny while increasing education by $1 billion a year,” he said. “And that is something we can absolutely do right now. We just have to have the leadership and courage to be able to stand up to some of the special interests.” 

Some Republicans support that idea, but progress is slow.

Noticeably absent was any debate over how — and when — to address the 2021 expiration of the six-tenths-of-a-cent Prop. 301 education sales tax. 

Democratic lawmakers want to expand it to a full cent and introduced bills to do so, though they were never given hearings. A handful of Republican lawmakers and state business leaders privately indicated interest in starting the discussion on expanding the tax to a full cent, but never went public with that.

“Prop. 301 is an issue we should have been addressing already,” said House Minority Leader Rebecca Rios, D-Phoenix. “There’s no reason to wait for 2020 when you know that the fiscal cliff is going to hit” when the measure expires in mid-2021.

Republican leadership said before the session even began that they weren’t interested in having the conversation this year. They stuck to that. 

In March, Ducey signaled there was no rush to get any version of Prop. 301 on the ballot. He said he would like to develop a “modern 301” in conjunction with education stakeholders. He is up for re-election in 2018; Prop. 301 expires in mid-2021.

“It’s important that this is successful, it’s important the policy is right, and we do have some time,” Ducey said at the time.

House Speaker J.D. Mesnard, R-Chandler, on the last day of the session said there is still no hurry to have the conversation. He said it could happen next session — or the session after that. 


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Looming lawsuits

Ducey and lawmakers this session turned a blind eye to several lawsuits that combined could leave the state billions of dollars in the red.

The lawsuits — including an education case filed late in the session — should not have come as a surprise to state officials, and yet Republican leadership made no move to prepare for them.

Next year, they may be forced to act as the cases advance and the courts make rulings.

A case filed last month that alleges the underfunding of the School Facilities Board could cost $2 billion. It involves the same legal team that successfully sued the state for underfunding inflation adjustments in public education starting during the recession.

That earlier case led to the passage of Proposition 123, which is expected to take an extra $3.5 billion from the state’s land-trust funds for a decade.

The new case is just getting started, but it serves notice that Arizona may be looking at billions more in funding needs in the not-too-distant future.

Weeks after the lawsuit was filed, Republican legislative leaders and Ducey have said little about it. It was not part of the public budget conversation. 

“We’ll see how that one plays out in court preliminarily,” said Shope, who also serves on the Coolidge Unified School District Governing Board. “It’s hard to make a snap judgment right now. We’ll see what the arguments are.”

Beyond that, there are other cases that remain unresolved.

The state is appealing a 2015 ruling that it must refund about $150 million in rental-car tax proceeds that were used to fund the Arizona Sports and Tourism Authority.

There is a federal class-action lawsuit pending for 17,000 children in Arizona’s foster-care system. Officials believe the costs could be significant.

The unresolved court cases come as the state expects a narrow cash balance of $42 million at the end of next year. The state expects to take in 0.4 percent more than it spends in fiscal 2018.

The cash balance is expected to grow to $70 million and $177 million in the next two years, but that doesn’t reflect any new one-time charges, new tax cuts or other spending hits that could leave the state with even tighter margins.

Promises on taxes

Ducey promised during his campaign — and regularly since — a tax cut every year. So far, he has delivered.

This year, the Legislature passed and Ducey signed a bill that boosts by $50 next year and another $50 the following year the amount Arizonans can subtract from their income when calculating taxes. The move will save taxpayers up to $5, depending on their income bracket. 

But Ducey has yet to make any significant push toward his goal of eliminating the income tax. The individual and corporate income tax combined bring in about $4.5 billion a year. 

With elections looming, some say Ducey may need to move on this next session. But the revenue may not be there.

Sen. Steve Smith, R-Maricopa, predicts taxes will again be a focus next session — but said it’s too early to know how big of a plan may be proposed. 

“You have to look at your revenues each year,” he said. “If the state is exponentially growing, I think you have more options. If it’s not growing at the rate that would be able to handle some of those reforms, then I think it would be no. But we’ll have to wait for the quarterly numbers and see where we are.” 

Minimum-wage issues linger

Existing state contracts that pay for services for Arizonans with developmental disabilities did not take into account the increase in the state’s minimum wage.

The Ducey administration this session cobbled together $25.1 million in the wake of voter approval of the higher wage to help the contractors meet their immediate payroll needs.

But the agencies were counting on the Legislature to approve more money to cover ongoing costs. Lawmakers provided $33 million in next year’s budget, but it is not enough to cover the next developments in the wage issue, said Stuart Goodman, who lobbies on behalf of the Arizona Association of Providers for People With Disabilities.

The groups say they need up to $17 million more to cover the July 1 onset of mandatory paid sick leave and a 50-cent per hour increase in the wage beginning in January. They launched an eleventh-hour bid to get a hike in their appropriation, but fell short

Lawmakers and Ducey’s office advised the contractors they could return to the Legislature early next session when and if their situations grow dire.

Rep. Regina Cobb, R-Kingman, said she fully expects them to be back.

“I think they’re going to need it,” she said.

She said last-minute efforts to find more money failed as lawmakers juggled competing priorities. Those priorities included the $5 million income-tax cut.

Rios said the organizations needed far more to stay afloat than what the Legislature gave them.

“The Legislature used the excuse that there was not enough money and gave a fraction of what was needed,” she said, adding that it will need to get addressed early next year. “But my concern is this Legislature will not act until providers are shutting down and those clients and their families are literally going without services.” 

Roads still in need

Lawmakers this session successfully restored a portion of tax money collected for statewide roadway construction and repairs. For the past several years, that money was used to pay for state police.

The budget included restoring $30 million of the $90 million swept from the Highway User Revenue Fund

But both Republican and Democratic lawmakers say more needs to be done to improve major corridors and smaller roadways outside of the state’s largest cities.

Since 2001, according to the League of Arizona Cities and Towns, the state has swept $347 million from the fund for public safety.

Rep. Noel Campbell, R-Prescott, introduced fuel-tax hikes in the House Transportation Committee, which he chairs. His Senate counterpart, Sen. Bob Worsley, R-Mesa, also tried to find ways to protect the road fund from the annual redirecting of dollars to the state Department of Public Safety.

Both efforts fell flat.

“We need to find a permanent source of revenue for the state police,” Campbell said.

But without support from Ducey, it will be hard to move forward, he said. And, he added, Ducey’s pledge to not raise taxes makes the path murky.

Shope said next year he would like to see lawmakers emphasize economic growth, which is tied to roadway development, in rural parts of the state. 

“We see what has happened in the Phoenix metro area — as far as economic development following the transportation corridors. One only has to drive the 101 on the east side of town and on the west side, and the 202 in the southeast Valley. The economic growth has followed where freeways have gone,” he said.

“We have a lot of projects that need to be done across the state. We do have to take care of rural Arizona.”


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